Letter of Intent Precluded Dismissal of Mechanic’s Lien

A contractor recorded a lien notice, using a letter of intent as the “written contract” supporting the lien. The owner moved for summary dismissal of the lien, arguing that the LOI was nothing more than an agreement to negotiate a contract, and no contract was signed. The trial court ordered the lien to be dissolved, but the Massachusetts Appeals Court vacated that order.

The LOI had been signed on April 17, 2018, and Congress, the contractor, was to hold its price for ten days. On April 19, the owner, Golden Pond, proposed that the parties sign the contract on May 3, 2019. Then, on April 27, Golden Pond notified Congress that the LOI had “terminated by its own terms.” On May 1, Congress sent Golden Pond a draft contract, and the parties continued to communicate in some manner until May 21, when Golden Pond notified Congress that it would not be selected. The lien notice followed shortly after a bill for $359,070.11 had been sent to Golden Pond

The LOI authorized Congress "to immediately commence procurement of all subcontractors and materials for the Project," but stated that the "Owner has no obligations until a final contract is signed." Congress argued that it had invested time and effort lining up subcontractors and preparing to start work. Golden Pond argued that the LOI contemplated a written contract which was never agreed upon.

The Appeals Court pointed out the obvious: there was a factual dispute, and the provision in the lien law allowing for summary dissolution does not apply to factual disputes, but only “defects that will customarily appear of record or be readily ascertainable by reference to undisputed documents.” Thus, the LOI has saved the day, at least for now, on the contractor’s lien claim. The case is Golden Pond Resident Care Corp. v. Congress Building Corp., 2019 Mass. App. Unpub. LEXIS 517 (July 16, 2019).